On October 11, 2023, Exxon Mobil announced its intent to acquire Pioneer Natural Resources, a dominant crude oil producer in the Permian Basin of West Texas.
On October 23, 2023, Chevron announced its agreement to acquire Hess Corporation, once a major refiner and distributor of petroleum products that more recently has transformed itself into a crude oil exploration and production company.
Each of these acquisitions are valued at over $50 billion.
On Thursday, January 20, 2022, at 12:00 pm EDT, the Subcommittee on Energy and Mineral Resources hosted a remote oversight hearing titled, “What More Gulf of Mexico Oil and Gas Leasing Means for Achieving U.S. Climate Targets.” EPRINC President Lucian Pugliaresi was one of the witnesses called to testify at this hearing, and in addition to his testimony he was asked many questions by committee members. His testimony as well as the accompanying slides are found here, and a full video of the hearing is here. The EMR website has full information about the hearing at this link.
In addition to his testimony, Lou was asked several questions for the record by Republican Members after the hearing was over. His response to those questions can be found here.
EPRINC has cohosted a webinar with the Global Gas Centre (GGC). The workshop was held on February 2, 2022 at 9:00 to 11:30 AM (Washington time) / 3:00 to 5:30 PM (Geneva time).
Recent power failures in the U.S. have raised public concerns about the stability and resilience of North American electricity grids. Spiking energy prices in Europe and ongoing constraints in natural gas supplies are pointing to a sustained crisis on the European Continent. While no single event can be identified as the primary cause of this turmoil, energy policies have played an important role and hold lessons for policy makers on both sides of the Atlantic.
Speakers included former U.S. Secretary of Energy Dan Brouillette; former Chairman of the Federal Energy Regulatory Commission (FERC), Neil Chatterjee; Arno Büx from Fluxys, European Natural Gas System Operator; Thomas Popik, Chairman and President, Foundation for Resilient Societies;
as well as U.S. and European industry leaders, experts from think tanks, the Global Gas Center and the Energy Policy Research Foundation. The discussion covered growing pressures on energy markets in the U.S. and Europe and what lessons policy makers should take from these developments.
Like many of our treasured Main Street businesses, the past few years have been hard on these small fuel retailers. However, there may be even more factors pitted against them than other businesses. These factors are being overlooked by our political leaders and mainstream press. EPRINC’s Emeritus President and current Trustee Larry Goldstein briefly offers some explanations. His piece can be found here.
On Tuesday, November 16 2021, EPRINC President Lucian Pugliaresi participated in a marathon hearing with the House Committee on Energy and Commerce. Some of the notable comments he made, pulling from EPRINC’s research on the ongoing energy transition, are listed below. In addition, the full testimony with charts is here and a video of the hearing in its entirety can be found here.
1. The Energy System is highly complicated, inter-connected regionally and globally in ways that are not always apparent. The energy transition presents a new set of supply and price risks for consumers and manufacturers. Fully implementing an energy transition over the next 30 years is neither easy nor can it be assured.
2. Achieving net zero in the developed world will reduce carbon emissions by only a small amount, likely no more than 20 percent of expected global emissions.
3. Regulatory programs as well as private sector commitments to accelerate the energy transition – whether it be mandates, targets, financial and procurement guidelines create uncertainty and financial risks that limit investment commitments to current legacy fuels, many of which are likely to remain in demand for years to come.
4. Most of the recent escalation in energy prices can be tied directly to dislocations in energy supplies (largely oil and gas) from the Covid-19 pandemic. However, government policies, such as the halt on leasing on federal lands, the cancellation of the Keystone Pipeline, the potential cancellation of line 5 from Canada, rising regulatory requirements and permitting delays are all threatening North American oil and gas production. We undermine this strategic asset at our peril if we abandon these fuels before the energy transition is well established.
5. Policy Matters. The US should see the current energy crisis in Europe as a cautionary tale and learn from it.
6. Policy initiatives that seek to accelerate the U.S. to a fully renewable energy complex will have global implications for energy security.
7. The transition will establish new environmental challenges and energy security issues in addition to the old.
The International Energy Agency (IEA), a collection of member countries formed in the 1970s to secure the energy security of the advanced Western democracies, is now calling for a halt to the development of new oil and gas resources as a fundamental strategy for addressing the threats from climate change. The halt in development is viewed by the IEA as essential for the world to reach net zero carbon emissions by 2050. Michael Lynch, Distinguished Fellow at the Energy Policy Research Foundation, Inc. (EPRINC) points out the risks of such a strategy in his paper entitled Shifting Oil Industry Structure and Energy Security Under Investment Phase-Outs. Since only private oil companies in the West are likely to respond, future oil supply probably would be dominated by Middle Eastern and Russian oil companies, mostly state-owned. Such a policy initiative, if successfully implemented, will see OPEC and allied producers (OPEC+) share of the world oil market supply rise to over 80% by 2040, degrading global energy security and severely limited the capability of the IEA to implement its Emergency Sharing System in the case of an oil crisis. The publication can be found here.
Throughout much of the developed world, there is a consensus that concern over climate change is leading to a rapid downturn in petroleum use and that petroleum will likely have a rapidly declining role in the world’s energy mix over the next 30 years. However, a rapid energy transition to a world no longer reliant on fossil fuels represents a formidable challenge and a high likelihood remains, especially in the developing world, that petroleum’s important and large contribution to the world energy mix will not be so easily displaced. Recent EIA forecasts show that world oil and gas demand has reverted to trend. Supply requirements for the end of 2022 are likely to exceed 100 million barrels/day, a remarkable recovery from a decline in liquids demands of over 15 million barrels a day in 2020 from the Covid-19 pandemic. Although Venezuelan oil production has been constrained by both technical mismanagement and sanctions, the size of its reserve base documents its potentially important role in meeting future world oil demand.
The timing of Venezuela’s petroleum future depends on whether it can enter the world oil market under traditional commercial conditions. On June 25, 2021, the U.S., Canada, and the E.U. issued a joint communiqué that made clear that a decision regarding the timing and specifics of the sanctions on Venezuela remains the primary determining factor on when and if Venezuela can play a larger role in the world oil market.
Even if Venezuela were somehow to find its way free of sanctions, the road back to higher production will require massive capital investment. Venezuela, which produced over 3 million barrels in day in the 1970s, is now at only 600,000 barrels per day. The authors estimate that the level of investment and amount of time required to rehabilitate the production potential of Venezuela would approach $30 billion USD in two stages:
Stage 1 – Pre-sanctions recovery: An investment of $7-9 billion over 2-3 years to get back to production prevalent before sanctions started in 2017 (about 2 million barrels/day).
Stage 2 – Post-recovery: An investment of an additional $20 billion/year for 2-3 years. These investments would take 4-5 years to yield additional production. This would require investment into offshore and underdeveloped onshore projects to bring them up to full production capacity. With proper investment, Venezuela can sustain a production output of approximately 2.5 million b/d over the next 20-30 years.
The authors provide an overview of Venezuela’s production potential, and evaluate the technical obstacles that must be addressed to restore Venezuelan oil production. Their paper can be found here.
EPRINC held a virtual workshop on The Transport Climate Initiative (TCI): Challenges and Opportunities on June 16, 2021.
EPRINC staff, policymakers, and regional experts explored the effectiveness of the program to meet its goals of lowering greenhouse gas (“GHG”) emissions. Among the topics discussed were how the program fits in with U.S. and international efforts to accelerate the energy transition, an assessment of the program’s impact on consumers, implementation challenges, and opportunities for green investments.
The Transportation and Climate Initiative (TCI) is a regional collaboration of potentially 12 Northeast and Mid-Atlantic states and the District of Columbia seeking to reduce consumption of petroleum-based fossil fuels in the transportation sector and introduce cleaner fuels and more effective transportation systems. The list of potentially participating jurisdictions are: Connecticut, Delaware, the District of Columbia, Maryland, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, Vermont, and Virginia.
A report on the event was written by Ashutosh Shastri, Senior Advisor, Global Gas Centre & Distinguished Fellow, EPRINC, and can be accessed here.
Colonial Pipeline Hack Highlights Growing Energy Security Risks:
Infrastructure Cyberattacks are a Threat to National Security
The recent hack of the Colonial Pipeline computer systems, which disrupted gasoline supplies to the Northeast has raised a new set of energy security concerns. Although the attack was presumably not the actions of a state entity, it is hard not to view it as an act of terrorism given its potential for widespread disruption. This is not a new threat. In the late 1990s, President Clinton issued Presidential Directive 63 which recognized that growing threats to critical infrastructure had become “increasingly automated and interlinked.” The Directive mandated that within five years (by 2003) critical U.S. infrastructure would be hardened to cyberattacks. Despite the Directive, measures to protect infrastructure from growing cyberattacks have not kept up.
The Energy Policy Research Foundation and the Global Gas Centre have jointly hosted a webinar on the “Future of North American Natural Gas In A Carbon-Constrained World.” A group of about 60 industry leaders, researchers, and senior policymakers participated in the workshop on June 3, 2021.
GCC and EPRINC are collaborating on a joint effort to evaluate the role of North American natural gas as governments worldwide undertake efforts to accelerate the energy transition. Among the more important objectives of this joint effort are identifying recent trends and longer-term uncertainties in North American natural gas markets, government and industry initiatives to address GHG emissions and the role of natural gas both in energy markets in North America as well as in the world market as an important fuel source through LNG exports. EPRINC and GCC staff, experts, policymakers, and a cross-section of industry executives continued this discussion on the current state of the North American natural gas market and an assessment of the new regulatory environment.
EPRINC’s Rafael Sandrea has published another paper, this one entitled “With Global Oil Demand on the Rebound, What About Supply?” The piece analyzes the impact of COVID-19 and the Texas Freeze on global oil demand and supply. Rafael also examines future oil supplies moving forward into 2021 by discussing trends in exploration and providing fresh comparative economics regarding oil supply vs. renewables.
Rafael’s paper can be found here.
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